Understanding the Executor’s year: timelines, obligations and legacy interest

Generally, the Executor(s) or Administrator(s) (“personal representative”) of an estate should endeavour to complete the administration of the estate within a year of the date of death of the deceased, a period commonly referred to as the ‘executor’s year.’

Importantly however, this timeline is a rule of convenience rather than a rule of law. As prescribed by section 49 of the Administration and Probate Act 1958 (Vic), the personal representative of an estate is not bound to distribute the estate before the expiration of one year from the date of death.

Instead, the personal representative has an obligation to the beneficiaries of the estate to take all reasonable steps to realise the estate is realised without delay, noting that the personal representative of an estate may be personally liable for any loss suffered as a result of undue delay. 

What happens if the legacies are not paid to beneficiaries within 12 months?

In many cases, delay in the administration of the estate is beyond the control of the personal representative. For instance, the administration of an estate and payment of legacies to beneficiaries may be delayed by the sale of real property, the inherent complexity of the estate or the estate’s involvement in litigation, such as a family provision claim. In these circumstances, the personal representative will not be considered to have caused undue delay to the administration of the estate and will likely escape personal liability.

On the contrary, a personal representative who has, without justification, failed to administer the estate within the executor’s year will expose themselves to personal liability. Pursuant to section 39B(3) of the Administration and Probate Act 1958 (Vic), the beneficiary of a legacy (ie. a monetary gift) has the right to claim interest on any amount which remains unpaid at the expiration of the executor’s year until payment is made.

As prescribed by section 3 of the Administration and Probate Act 1958 (Vic), the legacy interest rate is 2% above the cash rate last published by the Reserve Bank of Australia before 1 January in the calendar year in which the interest begins to accrue. 

Who pays the interest?

Importantly, the additional funds required to pay the interest claimed on a pecuniary legacy come out of the residuary estate. Therefore, it is the residuary beneficiaries of the estate who must bear the cost of the interest thereby reducing their entitlement in the residuary estate. In these circumstances, the residuary beneficiaries may seek for the personal representative to be held personally liable to pay the interest from their own funds.

Next steps

For more information about the Executor’s year, please contact our specialist Wills, Estates & Succession Planning Team.